Stocks sit near record highs as 'Santa Claus rally' builds, 2026 approaches: What to watch this week

Market Performance - The S&P 500 gained approximately 2.3% for the holiday-shortened week, while the Dow and Nasdaq Composite increased by about 1.6% and 2.5%, respectively [1] - The S&P 500 closed at 6,929.94 on Friday, with predictions from JPMorgan Chase and HSBC suggesting it could reach 7,500 by year-end 2026, while Morgan Stanley and Deutsche Bank set even higher targets of 7,800 and 8,000 [7] Santa Claus Rally - The current market momentum suggests a favorable setup for a positive "Santa Claus Rally," which is historically a bullish signal for January and the upcoming year [6] - The "Santa Claus Rally" typically encompasses the last five trading sessions of December and the first two of January, with expectations for continued positive performance into 2026 [5][6] Technology Sector - Nvidia became the first company to surpass a market capitalization of $5 trillion, reflecting the significant spending by major technology players in the ongoing AI arms race [5] - Despite concerns regarding the AI bubble and valuations, elevated multiples are seen as correctly anticipating above-trend earnings growth and an AI capital expenditure boom [8] Precious Metals and Commodities - Gold and silver have reached historical highs, driven by a shift towards safety investments, while copper has also hit record levels due to supply chain disruptions and tariff policy uncertainties [4]